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More Opposition to Interchange Settlement, but Resistance Might Be
Futile

Opposition to the proposed settlement in the credit card interchange case continues to grow, as another major plaintiff in the case rejected the agreement this week.

The National Association of Convenience Stores (NACS) has led the opposition, joined by Walmart, Target, SIGMA, an association representing independent motor fuel marketers and chain retailers, and now the National Grocers Association (NGA), which is among the most prominent of the class action plaintiffs in the original case.

NGA cited the settlement's lack of a mechanism to allow merchants to have a say in how interchange fees are set as their primary reason for joining the opposition.

"NGA joined the lawsuit on behalf of its independent retail grocer members over seven years ago to bring about real reform of the anticompetitive credit card swipe fee system. This proposed settlement agreement fails in this regard by allowing Visa and MasterCard to continue their dominant anticompetitive practices," said NGA President and CEO Peter Larkin. "Meanwhile, merchants and consumers will continue to pay exorbitant swipe fees with no hope of reform. NGA's members are also concerned about Visa and MasterCard's ability to use their dominance to prevent emerging and innovative lower cost payment options."

Interchange, or "swipe," fees are currently set unilaterally by card processors like Visa and MasterCard. While the proposed settlement provides for a $6 billion payment to retailers and allows merchants to pass on their future processing costs to their customers, it does not provide for transparency in the way that the fees themselves are set, meaning Visa and MasterCard could continue to charge fees at whatever rates they see fit without many options for recourse from merchants or buyers.

"The proposed settlement represents a small fraction of the $350 billion in swipe fees the card companies have charged merchants, and ultimately consumers, for the last seven years. This agreement only ensures that the card companies will continue to fix hidden swipe fees and be able to increase them at will for years to come," said Larkin.

Despite the intensity of the opposition, resistance to the settlement could prove futile. The opposition by trade groups means only that the groups themselves reject the settlement, not that their members do. Merchants will individually have the ability to formally opt out of the settlement should it be approved and if merchants representing 25% of Visa and MasterCard's credit card sales do choose to opt out of the agreement, the card processors will be able to cancel it. Still, even with retailers like Target and Walmart and trade groups like NACS and NGA, the opposition is likely to fall well short of that 25% threshold, meaning the settlement would be approved, Visa and MasterCard wouldn't have to make any further concessions, and individual merchants would be allowed to opt out of the agreement at their own risk.

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